December 15, 2011

SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments

The SEC has charged Wendell A. Jacobson and his son Allen R. Jacobson with securities fraud. The two men allegedly ran a $220M Ponzi scam under the guise of selling investments in their real estate business. The Commission claims that father and son violated sections of the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

The Jacobsons are accused of presenting investors with a chance to place their money in LLC in return for partial ownership in apartment communities that were located in a number of states. The two men, who belonged to Church of Jesus Christ of Latter-Day Saints, solicited other members to invest.

The father and son claimed to have bought apartment complexes at discount prices. They said they would renovate the units, enhance management, and resell properties in 5 years. Investors were told they would be paid their shares in monthly rentals and the future resales.

Per the securities complaint, the father and son team got over $220M from about 225 investors. Securities were sold as investment contracts. No registration statement was submitted to the SEC, which is required under federal securities law.

The Utah securities scam was operated under the umbrella company Management Solutions, Inc. The SEC says the two men behaved as unregistered brokers who made false claims when they told investors that their investment’s principal was safe. They also allegedly misrepresented how the money would be used. Meantime, investors were told that they would get 5-8% annual returns and resale profits.

In fact, says the SEC, not only were the LLCs sustaining major losses, but also the Jacobsons were using investor money to pay for their personal and business expenses. They were also using new investors' money to and pay earlier investors. The Jacobsons used the Ponzi scam to cause investors, who were getting “returns,” to think that the LLCs were making a profit.

Beginning last year, investors were told that properties were sold and they had made a profit when no sales actually occurred. Instead, the “sales” were used to move investors from and into specific properties.

The SEC is seeking disgorgement of ill-gotten gains, financial penalties, and prejudgment interest.

SEC Halts Father-Son Ponzi Scheme in Utah Involving Purported Real Estate Investments, SEC, December 15, 2011

Mormons fleeced in $220M investment scam: SEC, Investment News, December 16, 2011


More Blog Posts:
Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011

Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam, Stockbroker Fraud Blog, November 23, 2011

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Fraud, October 13, 2011

Continue reading "SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Affinity Fraud , Ponzi Scams

September 22, 2011

Financial Scammers Are Now Using YouTube, Facebook, LinkedIn, Twitter, and Other Websites to Target Investors, Warns Texas Securities Commissioner

Texas Securities Commissioner Benette L. Zivley wants investors to be aware that fraudsters are now using the Internet as a vehicle for their investment schemes. Online social networking Websites, such as Facebook, Twitter, YouTube, and Linked in, are among the sites being used to find potential victims, gain access to their personal information, and build relationships of “trust.” Scammers have even been known to purposely “mimicking” a target’s interests to try and get someone to invest. Considering that about 750 million users (who on average are linked to about 80 groups, community pages, and events) are logging 700 billion minutes a month on Facebook alone, this shouldn’t come as a surprise.

Affinity fraud scams are among the easier investment schemes to perpetuate online. This type of financial scam usually targets professional organizations, community service groups, religious communities, and other social networks. Whereas in the real world, a fraudster would have to work to establish actual connections with its target communities, now he/she can easily become part of these groups by pretending to share similar interests, religions, careers, or hobbies.

Online media channels, such as YouTube have now also become video forums through which to market financial scams. Remember, anyone can record an impressive sales pitch or edit professional looking footage to make themselves appear legitimate.

The State Securities Board warns that not only are financial scammers using the Internet to target investors, but also, they are going online to recruit their sales teams so that they can swiftly sell millions of dollars worth of inappropriate/bogus investments to their victims.

The Federal Bureau of Investigation offers a number of tips for how to avoid investment fraud schemes on the Internet:
• Don’t let a sophisticated Web site impress you. These days, sites with bells and whistles are not the difficult to get up and running.
• Do your due diligence before investing, including checking to see that the company involved is legitimate.
• Be careful about responding to investment opportunities made through unsolicited e-sources.
• Exercise caution when investing with companies and individuals located outside the US.
• Make sure you learn about the different terms and conditions involved with your investment.

You may want to limit how much personal information you make available/accessible on your social networking sites to people that you don’t know well.

A few warning signs that someone may be targeting you with an investment scheme:
• The promise of no risk and high returns
• Offshore operations
• Payments having to be made through an e-currency site
• Testimonials from “satisfied” clients

You can always contact the State Securities Board and request a free background check on a financial firm, investment professional, or the investment being offered. IT is also a good idea to always ask for written information (such as a prospectus) about an investment opportunity, as well inquire about the risks involved.

An example of a recent investment fraud scam that took place through the Internet involves a woman who solicited investments through the classifieds on Craig’s list. She also used these investors’ credit histories to apply for credit cards and loans. Another financial scammer, a man, used the online dating site Match.com to meet a woman and convince her that if she gave him $10,000, within a year he would be able to grow that into $1 million.

Our Texas securities fraud law firm is dedicated to helping clients recover their losses brought about by investment fraud scams.

SECURITIES COMMISSIONER WARNS OF DANGERS IN SOCIAL MEDIA, ONLINE MARKETING, Texas State Securities Board, September 22, 2011

Internet danger: Scammers use social network sites to find victims, Chester on Tribune, September 21, 2011

Federal Bureau of Investigation


More Blog Posts:
Man Allegedly Involved in Texas Securities Fraud Scam that Bilked Over 7,000 Deaf Investors of $3.45M is Charged by the SEC, Stockbroker Fraud Blog, September 12, 2011
Ex-Wextrust Capital COO Pleads Guilty to Role in $255M Affinity Fraud Scam, Stockbroker Fraud Blog, February 27, 2011

Texas Minister Pleads Guilty to Involvement in $7.2M “White Hat Guys” Securities Fraud that Bilked Thousands of Petro America Corporation Investors in the US and Canada, Stockbroker Fraud Blog, February 27, 2011


Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Affinity Fraud , Texas Securities Fraud

September 12, 2011

Man Allegedly Involved in Texas Securities Fraud Scam that Bilked Over 7,000 Deaf Investors of $3.45M is Charged by the SEC

The Securities and Exchange Commission has charged Jody Dunn with fraud. Dunn is accused of soliciting $3.45 million from over 7,000 deaf investors in a Texas securities scam. He is also deaf. According to the SEC, he engaged in material misrepresentations, the fraudulent and unregistered offering and selling of securities, and the misappropriation of investor funds.

Per the commission, Dunn told investors he would place their money with Imperia Invest IBC, which guaranteed returns of 1.2% a day. He solicited investments for Imperia between August 2007 and July 2010.

While he did send the send the remaining funds to the Imperia-owned offshore accounts, he never confirmed that the financial firm was really investing the money—even though he allegedly knew that Imperia lost investor funds and wasn’t properly crediting clients’ accounts. Dunn also never paid investors the interest they were owed and he failed to tell them that his fee was more than 10% of the money he collected from them.

Last year, the SEC charged Imperio with involvement in a $7 million fraud scam and secured a court order freezing the internet-based firms assets. The SEC claims that Imperia defrauded approximately 14,000 investors, who were told that they could only obtain their money by paying a few hundred dollars for a Visa debit card. Apparently, however, the financial firm did not have ties Visa and it never paid any money back to its victims.

In the commission’s complaint against Dunn, it is accusing him of making a number of misrepresentations to investors including:

• Claiming he would help them get into Traded Endowment Policies (viatical settlements) by having them invest through Imperia even though none of their money was used to buy TEPs.

• Claiming he knew the people behind Imperia even though he had never met anyone affiliated with the financial firm.

• Not being able to give an accurate analysis of the way he calculated profits or fees.
.
TEPs or Viatical Settlements
With TEPs, the insurance policy owner sells the policy before it matures. These are sold at a discount but in an amount greater than the current cash surrender value. All beneficial obligations then go to the new owner. Investors of the Imperia-offered TEP investments had to put in at least $50 for an $80,000 loan from a foreign bank. The funds were then supposed to go toward buying a TEP. The SEC is accusing Dunn of violating sections of the Securities Act and sections of the Exchange Act and Rule 10b-5 thereunder.

SEC Charges Solicitor in Investment Scheme Targeting Deaf Community, SEC, September 9, 2011

Texan defrauded deaf investors out of $3.45M, Investment News, September 12, 2011

Read the SEC Complaint (PDF)

SEC Charges Internet Company With Defrauding the Deaf, New York Observer, October 7, 2010


More Blog Posts:
Morgan Keegan & Company Ordered by FINRA to Pay $555,400 in Texas Securities Case Involving Morgan Keegan Proprietary Funds, Stockbroker Fraud Blog, September 6, 2011

Texas Minister Pleads Guilty to Involvement in $7.2M “White Hat Guys” Securities Fraud that Bilked Thousands of Petro America Corporation Investors in the US and Canada, Stockbroker Fraud Blog, June 21, 2011

Alleged $800 Affinity Fraud Scheme Prompts SEC to Sue GTF Enterprises and Its Money Manager, Stockbroker Fraud Blog, June 4, 2010

Continue reading "Man Allegedly Involved in Texas Securities Fraud Scam that Bilked Over 7,000 Deaf Investors of $3.45M is Charged by the SEC" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Affinity Fraud , Texas Securities Fraud , Viaticals

June 21, 2011

Texas Minister Pleads Guilty to Involvement in $7.2M “White Hat Guys” Securities Fraud that Bilked Thousands of Petro America Corporation Investors in the US and Canada

According to the US Attorney for the Western District of Missouri Beth Phillips,two ministers, a Waco, Texas minister and the other from Kansas City, Kansas, have pleaded guilty to participating in a $7.2M security fraud scheme that caused thousands of investors in Canada and the US to sustain losses. The investors had purchased shares in Petro America Corporation, which was reputed to have $284 billion in assets, including gold mines.

The two men are Texas minister Joseph Harrell and Kansas Minister Edward D. Halliburton. They pleaded guilty to conspiracy to commit securities fraud and wire fraud. They also admitted that they and others conspired together to obtain money through the bogus sale of the stock and the issuing of misrepresentations and omissions. Both men made almost $400,000 from the stock sales, selling millions of shares despite knowing that both Kansas and Missouri had put out cease and desist orders forbidding the sale of unregistered Petro stock.

Harrell, who acted as Petro America’s CFO, was affiliated with Ministers Alliance, of which Halliburton was President. The alliance was comprised of about 15 ministers who promoted and supported Petro American, sold shares to congregants, and called themselves the “White Hat Guys.” They even conducted weekly in-person meetings at a Denny’s and took part in regular calls with hundreds of investors in many US states.

Harrell, who sold stock to at least 90 investors reportedly laced many of his sales pitches with religious wording and claimed that Petro was a blessing from God. He has admitted to knowing that the company was fraudulent. He acknowledges giving investors information that was not complete and also misleading. Harrell said he agreed to sell the stock because he wanted to make a profit. According to the Justice Department, even as he was bilking investors and renting cars at $423/week, he was availing of food stamp benefits and Social Security disability.

Related Web Resources:
Texas minister's scam had him living the high life -- while collecting food stamps, June 17, 2011

Kansas City, Kansas and Texas Ministers Plead Guilty to Securities Fraud Conspiracy, Infozine, June 15, 2011

Related Web Resources:
Texas Foreign Currency Trader and Developer of “Alpha One” Convicted of Securities Fraud, Stockbroker Fraud Blog, June 15, 2011

District Court in Texas Decides that Credit Suisse Securities Doesn’t Have to pay Additional $186,000 Arbitration Award to Luby’s Restaurant Over ARS, Stockbroker Fraud Blog, June 2, 2011

Texas Securities Commissioner's Emergency Cease and Decease Order Accuses Insignia Energy Group Inc. of Misleading Teachers, Stockbroker Fraud Blog, May 23, 2011


Continue reading "Texas Minister Pleads Guilty to Involvement in $7.2M “White Hat Guys” Securities Fraud that Bilked Thousands of Petro America Corporation Investors in the US and Canada " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Affinity Fraud , Texas Securities Fraud

June 4, 2010

Alleged $800,000 Affinity Fraud Scheme Prompts SEC to Sue GTF Enterprises and Its Money Manager

U.S. Securities and Exchange Commission has filed a securities fraud lawsuit against investment firm GTF Enterprises Inc., money manager Gedrey Thompson, and associates Sezzie Goodluck and Dean Lewis. The SEC claims that GTF and Thompson targeted investors from the African-American and Caribbean communities in Brooklyn, NY. The affinity fraud scam bilked at least 20 investors of over $800,000 between 2004 and 2009.

The SEC claims that Thompson convinced clients to invest the money in GTF in exchange for lucrative investment returns with guaranteed safety of principals and other promises. He then went on to invest a “fraction” of the clients’ funds (losing thousands of dollars in the process), while using hundreds of thousands of their dollars to pay for his own expenses. The affinity fraud scheme cost some investors their life savings.

Among the multiple misrepresentations that the SEC says Thompson made to investors was the claim to one client that her investment was “150% guaranteed.” He allegedly told another investor that he could make him a millionaire. Thompson and GTF allegedly covered up the securities fraud by generating bogus quarterly account statements for clients. Goodluck and Lewis are accused of helping Thompson with his investment scheme.

“Our firm has handled many affinity fraud cases and has recently seen a substantial increase in such claims, remarked Stockbroker Fraud Attorney William Shepherd. “Affinity fraud occurs when dishonest people target victims who trust them because of a common language, race, religion, background or even occupation. It is reprehensible when stockbrokers, financial advisors and others take advantage of this common bond. Fortunately, most judges, juries and arbitrators who decide these cases agree. However, some affinity fraud victims are hesitant to take legal action to recover their losses. Others properly feel it is their duty to ‘clean up' their own neighborhood.”

Related Web Resources:
SEC Says New York Investment Firm GTF Defrauded Investors, Wall Street Journal, May 28, 2010

Read the SEC Complaint (PDF)

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Affinity Fraud , SEC Enforcement

March 8, 2010

Securities Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP Warns Investors Against Affinity Fraud

Affinity fraud involves investment schemes that target specific groups, such as the elderly, those belonging to identifiable ethnic or religious communities or members of professional groups. Fraudsters seek to gain the trust of members of the group by either belonging to the group or pretending they belong. One tactic is to seek to fool group leaders into thinking the investments are legitimate so that they will assist in promoting the fraud. This is often accomplished by generating false profits for formal or informal leaders of the group at the beginning.

Pyramid schemes and ponzi scams are often employed to commit affinity fraud. In these schemes funds from new investors are used to falsify profits to current investors. This lulls them into believing their investments are turning a profit. as new investors are deceived into believing their investments will also soon grow in value. Inevitably, when there are no more new investors to sign up, the scheme falls apart and investors usually later learn the fraudster has stolen their funds.

However, affinity fraud can often involve abusing trust to lure victims into simply investing into high-risk and/or high-commission investments to generate commissions and fees, or buying and selling ("churning") invesements to gain multiple comissions.

Affinity fraud is based on the special trust within a group and, because those targeted tend to be close-knit, victims are often slow to detect the fraud. Furthermore, affinity fraud victims are often persuaded by the fraudster to attempt to resolve the dispute quietly rather than seeking legal assistance, preferably someone who is a stockbroker fraud lawyer.

Our securities fraud law firm offers free confidential consultations to determine whether someone has been the victim of affinity fraud. It is essential that legal help be sought before trying to resolve affinaty fraud claims privately. Victims can often fall prey again to the fraudster by destroying their legal rights to recovery,

As well, contacting authorities without legal advise can actually harm the victims ability to recover their losses. For example, contacting the SEC Complaint Center or state securities regulators without proper proof, can cause the situation to worsen and remaining funds to disappear as a long arduous investigation is contemplated.

Unfortunately, many people are unaware that affinity fraud even exists. The desire to make money on the advice of a “trusted” community member can be too hard to resist. Unfortunately, this can result in huge financial losses for those involved.

The US Securities and Exchange Commission offers good guidance as to avoid affinity fraud:

• Even if you trust the person touting the investment opportunity, it is a good idea to do your own due diligence. The person bringing you the deal may not even realize that an investment scam is involved.

• Be wary of investments that promise guaranteed returns or amazing profits. Remember that there are always risks involved when you invest.

• Make sure that any investments that you buy into are documented in writing. Consider it a possible red flag if you are told to keep the opportunity to yourself.

• Don’t feel pressured into investing. Question all “once-in-a-lifetime” investments.

• Be careful of investment opportunities sent to you by strangers via the Internet.

Related Web Resources:
Investor.gov

Securities and Exchange Commission

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Affinity Fraud

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